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London Calling – Why companies choose London as their European HQ

Posted by John Hall on November 4, 2015

You could call it the London effect. In purely domestic terms, the UK capital is an economic powerhouse, accounting for around 22% of total GDP. That’s impressiveenough, but when viewed from an international perspective it becomes clear that London has become a magnet for US and Asian companies seeking not only a European headquarters but also a bridgehead to the EU. Indeed, according to a Deloitte survey published last year, two out of five global businesses with a European HQ locate in London. (1)

So why has London become the location of choice for so many international businesses? On a continent where Berlin, Paris, Madrid and a host of others are competing vigorously to attract multinationals in search of a European base, why has London proved so attractive? After all, this is a city perched on the western edge of Europe and separated from the main land mass by the often choppy waters of the English Channel and North Sea. In theory, Paris or Berlin would offer a home much more at the centre of the world’s biggest trading bloc.

Some clear advantages

Well some of London’s success is undoubtedly due to a number of happy accidents. For one thing, the capital is well positioned in terms of its time zone between the giant economies of the US and the Far East. That’s hugely advantageous in terms of London’s potential as a commercial hub.

Language is also a factor. Clearly US business leaders are attracted to London because English is the common language. Equally, English is also the language of global business. Thus London for a senior executive from China or Singapore, is probably an easier posting than, say, Madrid or Berlin, simply because English will be more familiar than Spanish or German.

But there are other factors too. London’s population is just shy of 10 million and the city currently boasts around 1.5 million highly skilled workers. In other words, there are plentiful supplies of skilled and unskilled labour.

A talent magnet

And London is a talent magnet, drawing in people to work in finance and financial services – centred around the City of London and Canary Wharf – and increasingly in the burgeoning tech sector. Fed by graduates from world-class universities, the area of East London known as “Tech City” has grown rapidly in recent years and is now an acknowledged global hub of digital expertise. The same Deloitte survey found that nearly half of Europe’s skilled workers are employed in London. This compares with 19% in Paris, the next highest scoring city.

It has to be said that London’s success in attracting global companies has been aided and abetted by huge efforts from inward investment (and export promotion) agency UKTI and the Mayor’s Office. Equally central government has sought to make Britain as competitive as possible by cutting corporation tax to 20%. In its report on why the UK is a number one destination, the British government also cites the ease with which companies can set up here. (2)

World class infrastructure

But it’s important to note, that London’s success is also dependent on infrastructure and that includes the all-important telecommunications and IT backbones.

It’s not widely reported that London remains the largest telecom hub in Europe. What’s more, a recent survey by property company CBRE found that the capital’s data centre capacity is at least twice as large as any other city in Europe. For the new breed of technology companies along with established businesses, the connectivity and functionality offered by the telecoms and data centre infrastructure ensures that business gets done.

In other words, London ticks a lot of boxes. Businesses coming to the capital can draw on a huge well of technical and commercial skills, benefit from world class infrastructure and – crucially – have access to the European Union while also living in a city that is renowned for culture and entertainment.

As things stand, more US firms – including Facebook and Google – have made London their base than any other city. It is a trend that is likely to continue.

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